Now over Roth IRA income limit @#&$

[KenZ71]

So I know this is supposed to be good, both wife & I earned good raises that pushed us out of range where we can contribute to Roth IRAs. The part that stinks we've already contributed a bit to our Roths, grrrrr.

From what I've read need to take a few steps, are these right?

1) Withdraw over contribution from both accounts + the % of earnings i.e. if Contribution is x% of total on contribution date (or start of calendar year?)

2) The x% of gain at withdrawal needs to come out.
Taxes will be owed on the earnings withdrawn

I am very tempted to try and take a couple months off but that would be counterproductive

[Dash man]

You can still contribute to a Roth IRA as long as you have earned income, using the backdoor method. Contribute to a traditional IRA first, then roll it over into your Roth IRA. It’s simple and legal.

[GrayHare]

Note that if you have existing untaxed money in a tIRA, a "backdoor Roth" is a conversion to Roth that will trigger proportional taxation of the untaxed amount.

[KenZ71]

Yup, I know I could do the backdoor IRA for future money.

More interested in do I have the current next steps right for the over contribution

[pb4uski]

Just call your brokerage or fund manager... they can identify the contribution and either recharacterize the contribution to your traditional IRA (assuming you are eligible to contribute to a tIRA) or do a withdrawal (including any growth).

[Alan]

Quote:

Originally Posted by pb4uski Just call your brokerage or fund manager... they can identify the contribution and either recharacterize the contribution to your traditional IRA (assuming you are eligible to contribute to a tIRA) or do a withdrawal (including any growth).

+1

This happened to me once and I simply asked Vanguard to recharacterize the Roth contribution into a non-deductible IRA contribution.

[dtbach]

Quote:

Originally Posted by Alan +1 This happened to me once and I simply asked Vanguard to recharacterize the Roth contribution into a non-deductible IRA contribution.

Good advice here. Not that hard. Happened to me also. It's a pain but then on the other hand its good to be in that position if you know what I mean. . .

[KenZ71]

Yes, great to be in this position. I liken it to being at an all you can eat buffet where the choice is filet, T Bone, lobster, etc.

Since these Contributions have been growing with some very nice Facebook calls I also have some large gains. Again, great position. But does that mean the gains proportionally need to be withdrawn as well? As of what point in time?

Can't find anything online documentation, intuit.com / turbotax is just redirecting to my return has been accepted

[RunningBum]

Yes, the gains come out as well, at the same time you pull back the contribution. It will be as if you never made the contribution. Your broker or fund manager should be able to figure out how much that is. As at least 2 people have already said, contact them on how they handle it. Might as well do it ASAP so you can start the back door Roth process sooner than later.

[gauss]

Any growth on the ill-gotten gains will need to come out and be taxed -- otherwise a 6% excise tax will be occurred each year going forward that the excess contribution remains and you continue to contribute the max allowed each year.

Note many fund companies (ie Vanguard) provide a pdf form too to correct this so you can review the process ahead of time if desired.

The keyword, if I recall,is return of excessive contribution.

The other potential option, as others have mentioned, is a Roth contribution recharacterization. Note there are deadlines for this to occur if you choose this option.

-gauss